Elizabeth Warren on GameStop: SEC Should Get Rid Of Its Duff And Do Its Job

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“Actually, we don’t know who all the players are in all of this – if there’s a lot of money on both sides,” Warren told Dana Bash on Sunday on “State of the Union”. “That’s why we need an SEC investigation.”

Market watchers have been very supportive of traders who bet on stocks such as GameStop (GME) after being promoted by a group of writers on the WallStreetBets subreddit, which now has over 7.5 million subscribers. Hedge funds and other short sellers have lost huge sums of money after betting against stocks targeted by Redditors.

Yet Wall Street has also benefited from the power surge in GameStop’s stock. Its 1600% growth this month was not exclusively fueled by retail investors using free trading apps, such as Robinhood. Hedge funds hedging their bets and other investors with deep pockets helped push up the share price.

For example, Warren notes that when Robinhood, TD Ameritrade and other brokerages began to restrict access to AMC (AMC), GameStop and similar stocks, players on Wall Street remained able to trade these stocks.

She called Robinhood’s decision to flip the switch and prevent users from buying GameStop in the middle of a trading session “just plain wrong.”

“He can’t try to help hedge funds at the same time as he claims to help individual investors,” Warren said, admitting she didn’t know if that was what Robinhood was doing – there is not enough information on an opaque market.

That’s why Warren thinks the SEC should investigate the GameStop saga: to make sure that a set of players don’t manipulate the market, treat it like a casino, and prevent everyday investors from participating in open markets.

“Understand: What’s going on with GameStop is just a reminder of what has been going on Wall Street for years, years and years. It’s a rigged game,” she said. “We need a market that’s transparent, level and open to individual investors. It’s time for the SEC to get rid of its duffs and do its job.”

Warren said Wall Street and Corporate America have benefited retail investors through share buybacks for years – artificially inflating the value of their shares – and through unfair arbitration clauses that benefit brokers. She reiterated her call to end stock buybacks and called for a more active and energetic SEC.

The SEC should “develop a backbone” and enforce its own rules, she said.

“The truth is hedge funds, a lot of giant companies like the fact that markets aren’t efficient,” she said. “They love that they can manipulate these markets because they get better returns and individual investors lose.”

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